Quick Facts
What’s Forex?
In Forex (foreign exchange; also known as FX) trading, traders buy one currency while simultaneously selling another. Basically, traders exchange the currency that they are selling for the one that they are buying. The Forex market is an over-the-counter (OTC) market.
The biggest financial market in the world
Forex is the biggest and the most actively traded financial market in the world with an average daily turnover of 3 to 4.5 trillion dollars! Unlike the stock market, there is no centralized exchange for Forex. All orders are completed via phone or done electronically.
Largest Advantage: Largest Liquidity
FX market provides huge liquidity incomparable in size to that of the stock market. Because of its huge liquidity, there are always enough sellers and buyers during both bull and bear market (allowing you sell your position and profit at any time). The orders are carried out immediately in FX market, while it takes luck and great skill to complete orders in the stock market during extreme market conditions.
Trade 24 hours a day
Forex market is traded 24 hours a day from Sunday 5PM ET to Friday 5PM ET. It moves around the globe starting from Tokyo, London, to New York.
Currency Pairs
Currencies trade in pairs, for example Euro/US Dollar (EUR/USD) or Australian Dollar/Japanese Yen (AUD/JPY). The most popular currencies traded in this market are Euro (EUR), US Dollar (USD), Swiss Franc (CHFF), Japanese Yen (JPY), Australian Dollar (AUD), Canadian Dollar (CAD), British Pound (GBP), and New Zealand Dollar (NZD). These are the most liquid currencies and 85% of daily Forex trading happens in these eight major currency pairs.
Reading Forex quotes
The first currency listed in the pair is the base currency and its value is always “1”. For example, the base currency for EUR/USD is Euro. If the quote goes up, that means Euro has strengthened against US Dollar. In other words, with Euro you can purchase more USD than before. Basically, rising quote means the base currency is getting stronger while a declining quote means the opposite.
Bid and Ask
The “bid” is the price which you can sell base currency and “ask” is the price at which you can buy base currency.
pip
Pip is short for “percentage in point”. It is the last decimal point in exchange rates or currency pairs. Traders calculate their profit/loss by counting pips. For example, if you sold USD/CHF at 1.4170 and bought at 1.4160 you made 10pips. For most currencies, the last decimal point is .0001 except for USD/JPY. In this currency pair, there are only two decimal places 0.01.
In Forex (foreign exchange; also known as FX) trading, traders buy one currency while simultaneously selling another. Basically, traders exchange the currency that they are selling for the one that they are buying. The Forex market is an over-the-counter (OTC) market.
The biggest financial market in the world
Forex is the biggest and the most actively traded financial market in the world with an average daily turnover of 3 to 4.5 trillion dollars! Unlike the stock market, there is no centralized exchange for Forex. All orders are completed via phone or done electronically.
Largest Advantage: Largest Liquidity
FX market provides huge liquidity incomparable in size to that of the stock market. Because of its huge liquidity, there are always enough sellers and buyers during both bull and bear market (allowing you sell your position and profit at any time). The orders are carried out immediately in FX market, while it takes luck and great skill to complete orders in the stock market during extreme market conditions.
Trade 24 hours a day
Forex market is traded 24 hours a day from Sunday 5PM ET to Friday 5PM ET. It moves around the globe starting from Tokyo, London, to New York.
Currency Pairs
Currencies trade in pairs, for example Euro/US Dollar (EUR/USD) or Australian Dollar/Japanese Yen (AUD/JPY). The most popular currencies traded in this market are Euro (EUR), US Dollar (USD), Swiss Franc (CHFF), Japanese Yen (JPY), Australian Dollar (AUD), Canadian Dollar (CAD), British Pound (GBP), and New Zealand Dollar (NZD). These are the most liquid currencies and 85% of daily Forex trading happens in these eight major currency pairs.
Reading Forex quotes
The first currency listed in the pair is the base currency and its value is always “1”. For example, the base currency for EUR/USD is Euro. If the quote goes up, that means Euro has strengthened against US Dollar. In other words, with Euro you can purchase more USD than before. Basically, rising quote means the base currency is getting stronger while a declining quote means the opposite.
Bid and Ask
The “bid” is the price which you can sell base currency and “ask” is the price at which you can buy base currency.
pip
Pip is short for “percentage in point”. It is the last decimal point in exchange rates or currency pairs. Traders calculate their profit/loss by counting pips. For example, if you sold USD/CHF at 1.4170 and bought at 1.4160 you made 10pips. For most currencies, the last decimal point is .0001 except for USD/JPY. In this currency pair, there are only two decimal places 0.01.
